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Posts Tagged ‘Rendell’

A split panel of the Third Circuit recently joined the minority of federal courts that have denied preliminary injunctive relief to for-profit corporations and their owners in RFRA and Free Exercise challenges to the HHS Mandate. Both judges in the majority (Judge Rendell and Judge Garth) endorse the district court’s conclusions that “a secular, for-profit corporation . . . has no free exercise rights under the First Amendment, and is not a “person” under RFRA.” Writing in dissent, Judge Jordan contends (powerfully) that these conclusions rest on erroneous premises and merit further consideration by the court. If anything, Judge Jordan’s dissent understates the problems with the majority’s adoption of these conclusions because the standard of review did not require him to reach definitive conclusions. There is no legal basis for a judicial carve-out of “secular, for profit corporations” from RFRA’s protections.

RFRA provides that “[g]overnment shall not substantially burden a person’s exercise of religion” unless the government satisfies strict scrutiny. 42 U.S.C. § 2000bb-1(a) (emphasis added). In the U.S. Code, “person” ordinarily encompasses “corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.” 1 U.S.C. § 1. Nothing in RFRA excludes corporations generally. To the contrary, it is plain that corporations can assert claims under RFRA. The only Supreme Court case applying RFRA against the federal government involved a claim asserted by a corporation, O Centro Espírita Beneficente União do Vegetal.

Rather than adopt the obviously incorrect interpretation of “person” to exclude corporations, courts have carved up the category of corporations into “religious corporations” and “secular, for-profit corporations.” But there is no textual basis for this distinction in the statutory term “person.”

When one analyzes the claim, it turns out that the argument is not really about the meaning of the word “person” (even though the conclusion of the argument purports to be a claim about the meaning of this word). Rather, the argument pivots on “exercise of religion.” In the words of the district court opinion adopted by the Third Circuit, “a for-profit, secular corporation cannot exercise religion.”

Again, the claim is not that corporations cannot engage in exercise of religion. After all, corporations can, and do, exercise religion. Consider, for example, Church of Lukumi Babalu Aye, Inc. or Corporation of the Presiding Bishop of the Church of Jesus Christ of Latter-Day Saints. The claim, rather, is limited to “secular, for-profit corporations.” But the claim rests on a mistake about “exercise of religion” under federal law and a mistake about corporate action.

As to “exercise of religion,” it is plain that a religiously based refusal to do something otherwise required by law is an “exercise of religion.” Indeed, two of the leading cases on the meaning of the Free Exercise Clause involved individuals who refused, in the course of their employment (profit-seeking employment!) to do something. Because of their religious beliefs, Eddie Thomas refused to fabricate tank turrets and Adele Sherbert refused to work on Saturdays. These religion-based refusals were their protected exercises of religion.

A corporation’s religion-based refusal to engage in a particular action is also an “exercise of religion.” A corporation’s religion-based refusal to open its stores on Sundays, for example, is as much an exercise of religion as an individual’s refusal to  work on Saturdays. The involvement of a profit motive makes no difference. People work for money, and some choose not to work on certain days for religious reasons. Similarly, for-profit corporations operate for money, and some choose not to operate on certain days for religious reasons.

Some judges seem to think that a for-profit corporation can do nothing but seek profits. In the Third Circuit decision mentioned above, for example, Judge Garth insists that “the purpose–and only purpose–of the plaintiff Conestoga is to make money!” There is no reason to characterize corporate purpose so narrowly, and certainly no basis in corporate law to do so. Even a publicly traded corporation with an obligation to act in the best interests of shareholders can be “socially responsible” and incur various costs in pursuit of long-term value and goodwill.

Unfortunately, the misunderstandings involved run even deeper. Judge Garth approvingly adopts Judge Heaton’s reasoning in the Hobby Lobby case that “[g]eneral business corporations . . . do not pray, worship, observe sacraments or take other religiously-motivated actions separate and apart from the intention and direction of their individual actors.” But this reasoning applies as well, of course, to religious corporations. All corporations act through “the intention and direction of their individual actors.” When performed under certain circumstances, however, the actions of individuals count as the action of the corporation. We have no problem understanding this concept in the context of discrimination. If a for-profit corporation were to announce a policy to refuse to hire Muslims, or adherents of some other religion, there would be no difficulty in attributing that religion-based discrimination to the corporation. The law recognizes corporate intention and corporate motivation all over the place. If a for-profit corporation can discriminate on the basis of religion, why can’t a for-profit corporation perform some other act on the basis of religion? When Hobby Lobby Stores, Inc., for example, decides to honor the Sabbath by staying closed on Sundays (and thereby forgoing profits the corporation would otherwise earn), that is a corporate act on the basis of religion–a corporate “exercise of religion.” And just as a corporate refusal, for religious reasons, to operate on a particular day is a corporate “exercise of religion” under federal law, so too is a corporate refusal, for religious reasons, to include particular drugs and devices in the group health plan offered by the corporation to its employees.

Statutory law does sometimes distinguish between for-profit and not-for-profit corporations. Under Title VII, for example, for-profit corporations may not limit hiring to co-religionists, while some not-for-profit corporations can. But this only shows that Congress knows how to make that distinction when it wishes to do so. Congress made no such distinction in RFRA.

If people think that, as a matter of good public policy, there should be such a difference, then Congress can amend RFRA. Or Congress can amend the PPACA to explicitly exclude the application of RFRA’s protections from the statutory scheme. These exclusions might raise some constitutional questions, but we are not even close to that right now. Instead, some courts are incorrectly carving out certain corporations from RFRA’s blanket coverage. These judicial carve-outs are based on mistaken statutory interpretation, a mistaken understanding of the meaning of “exercise of religion,” and a mistaken understanding of corporate action.

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Federal law does not allow indirect purchasers to pursue damages under the antitrust laws. Many states follow this rule, and many do not. The Third Circuit’s en banc decision in Sullivan v. DB Investments affirms the certification of an indirect purchaser settlement class that treats indirect purchasers who can pursue damages claims under state antitrust law identically with indirect purchasers who cannot pursue damages claims under state antitrust law. Objectors to certification and settlement challenged certification based on commonality and predominance grounds, and challenged the pro rata distribution aspect of the settlement as unfair under Rule 23(e). I agree with the dissent that there are Rule 23 problems with the certification and the settlement. The best way to think about those problems, in my view, is as a failure of typicality.

Apart from the majority opinion by Judge Rendell and the dissent by Judge Jordan, there is also a concurring opinion by Judge Scirica, a leader among federal judges in analyzing class actions. Yet there is virtually no analysis of the typicality requirement in any of the opinions. This is an important omission from the analysis, because it is the typicality requirement that specifically calls for a claim to claim comparison. See Rule 23(a)(3) (requiring an assessment whether “the claims or defenses of the representative parties are typical of the claims or defenses of the class”).

Consider the following key paragraphs from the en banc majority’s opinion:

At bottom, we can find no persuasive authority for  deeming the certification of a class for settlement purposes improper based on differences in state law. The objectors and our dissenting colleagues nevertheless insist that, despite the prevalence of the shared issues of fact and law stemming from the defendant‘s conduct common as to all class members and each class member‘s resulting injury, states‘ inconsistent treatment of indirect purchaser damages claims overwhelms the commonalities. They advocate this because approximately twenty-five states have not extended antitrust standing to indirect purchasers through Illinois Brick repealer statutes or judicial edict; likewise, some uncertain number of states do not permit an end-run around antitrust standing through claims based on consumer protection and/or unjust enrichment statutes. (See Quinn Supp. Br. on Reh‘g En Banc 21-22.) It follows then, they argue, that a large proportion of the Indirect Purchaser Class lacks any valid claims under applicable state substantive law, and, therefore, cannot “predominantly” share common issues of law or fact with those Indirect Purchasers actually possessing valid claims.

In turn, they insist that a district court must undertake a thorough review of applicable substantive law to assure itself that each class member has “at least some colorable legal claim” (Dissenting Op. at 10) or “has a valid claim” (Quinn  Supp. Br. at 16) before certifying a settlement. But this focus is misdirected. The question is not what valid claims can plaintiffs assert; rather, it is simply whether common issues of fact or law predominate. See Fed. R. Civ. P. 23(b)(3). Contrary to what the dissent and objectors principally contend, there is no “claims” or “merits” litmus test incorporated into the predominance inquiry beyond what is necessary to determine preliminarily whether certain elements will necessitate individual or common proof. Such a view misreads Rule 23 and our jurisprudence as to the inquiry a district court must conduct at the class certification stage. An analysis into the legal viability of asserted claims is properly considered through a motion to dismiss under Rule 12(b) or summary judgment pursuant to Rule 56, not as part of a Rule 23 certification process.

The problem with the majority’s analysis would have been evident if the clear divergence among the claims possessed by class members who have antitrust standing to seek damages and the claims possessed by class members who do not have antitrust standing to seek damages had been viewed through the lens of the typicality requirement.

By comparison, consider the following discussion of typicality in a Fourth Circuit opinion about a putative antitrust class action, Dieter v. Microsoft, 436 F.3d 461 (4th Cir. 2006):

The class action device, which is “designed as an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only,” Gen. Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 155, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982) (internal quotation marks omitted), allows named parties to represent absent class members when, inter alia, the representative parties’ claims are typical of the claims of every class member. To be given the trust responsibility imposed by Rule 23, “a class representative must be part of the class and possess the same interest and suffer the same injury as the class members.” Id. at 156, 102 S.Ct. 2364 (internal quotation marks omitted). That is, “the named plaintiff’s claim and the class claims [must be] so interrelated that the interests of the class members will be fairly and adequately protected in their absence.” Id. at 157 n. 13, 102 S.Ct. 2364. The essence of the typicality requirement is captured by the notion that “as goes the claim of the named plaintiff, so go the claims of the class.” Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 340 (4th Cir.1998) (quoting Sprague v. Gen. Motors Corp., 133 F.3d 388, 399 (6th Cir.1998) (internal quotation marks omitted)).

The typicality requirement goes to the heart of a representative parties’ ability to represent a class, particularly as it tends to merge with the commonality and adequacy-of-representation requirements. See Amchem, 521 U.S. at 626 n. 20, 117 S.Ct. 2231Gen. Tel., 457 U.S. at 157 n. 13, 102 S.Ct. 2364. The representative party’s interest in prosecuting his own case must simultaneously tend to advance the interests of the absent class members. For that essential reason, plaintiff’s claim cannot be so different from the claims of 467*467 absent class members that their claims will not be advanced by plaintiff’s proof of his own individual claim. That is not to say that typicality requires that the plaintiff’s claim and the claims of class members be perfectly identical or perfectly aligned. But when the variation in claims strikes at the heart of the respective causes of actions, we have readily denied class certification. See, e.g.,Broussard, 155 F.3d at 340-44 (holding that plaintiffs could not sustain a class action based on a theory of collective breach of contract because variations in the claims undermined typicality); Boley v. Brown, 10 F.3d 218, 223 (4th Cir.1993) (affirming the district court’s denial of class certification when the resulting harm was dependent on considerations of each class member’s unique circumstances). In the language of the Rule, therefore, the representative party may proceed to represent the class only if the plaintiff establishes that his claims or defenses are “typical of the claims or defenses of the class.” Fed.R.Civ.P. 23(a)(3) (emphasis added).

Thus, it follows that the appropriate analysis of typicality must involve a comparison of the plaintiffs’ claims or defenses with those of the absent class members. To conduct that analysis, we begin with a review of the elements of plaintiffs’ prima facie case and the facts on which the plaintiff would necessarily rely to prove it. We then determine the extent to which those facts would also prove the claims of the absent class members.

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